Capital gain distributions are also known as?

Capital gain distributions are referred to as capital gain dividends because they represent the distribution of profits that a mutual fund or other investment vehicle realizes from selling capital assets. When an investment fund sells assets for more than their purchase price, the gains are passed on to shareholders in the form of capital gain distributions or dividends. This terminology emphasizes that these distributions are a return on investment related to capital gains rather than ordinary dividends that might be derived from operational profits.

Capital gain dividends are typically reported to investors on Form 1099-DIV, and they may be subject to different tax treatment compared to ordinary income, which is an important consideration for investors when planning their taxes. This classification helps clarify the nature of these distributions and their effects on a taxpayer's financial situation.